Redrow said on Tuesday it would focus on “higher-returning regional businesses”, including 1930s-style suburban developments, as it warned that profits for 2020 will fall substantially compared with 2019.
Estate agents have reported more demand for properties outside cities since the pandemic as the government continues to urge people to work from home where possible.
John Tutte, Redrow’s executive chairman, said recent surveys of buyers had shown stronger demand for larger homes with more green space, bolstering the case for the company to focus on developments outside the capital that offer quicker returns.
“We’re confident in a post-covid environment they’ll continue to be attractive,” he said. “If the studies are proven to be right there will be more people looking to live in suburban areas.”
Regions where the company sees particular room for expansion include the Thames Valley around Oxford, the Oxford to Cambridge corridor, Nottingham and Leicester in the east Midlands and areas in the east of England such as Basildon in Essex.
The pandemic had also underlined the need for fast internet access, Tutte said, although he did not anticipate adding separate office facilities to new houses.
Reducing building in London will be costly, with impairments to be reported in its next accounts. The company will continue to build its Colindale Gardens development to the north of the capital.
“We just feel we can better invest our capital outside London and get quicker returns,” Tutte said. “For us it is better to divert our capital into our regional businesses where we have quite a lot of room for expansion.”
The change of strategy comes after a difficult period for builders as a result of the pandemic. Redrow said turnover would drop by a third in the year to 28 June 2020 to £1.3bn, against £2.1bn in 2019.
Profits would fall “as a consequence of the impact of Covid-19” as well as the cost of exiting London, the company said.
Physical distancing protocols on sites and extended customer handover meant it would deliver houses more slowly. The company said it was building at 124 developments – although it had again paused development in Leicester because of the local lockdown announced on Monday.
Redrow also said it had “resilient cash flow” which meant it did not need government help, either through support for wages or lending schemes, despite being eligible.
The company said it was planning to give back all of the money it had received under the government’s job retention scheme, which pays the salaries of furloughed workers. Some 1,600 people were furloughed at the start of the pandemic. It is understood that the company will return significantly less than £10m it had claimed under the scheme.
“You don’t want to put yourself in a position where somebody can point the finger at you,” Tutte said. “There are probably other companies that need it more.”